uppose that examination of a pro forma reveals that the fifth year net operating income (NOI) for an income producing property that you are analyzing is $138,446 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected rental growth rate for the property to be 5% per year, determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%.

Respuesta :

Answer:

Calculate the sale price at the end of year 5 as follows:

Sale price at the end of year 5 = NOI x (1 + growth Tale) / Capitalization rate

Sale price at the end of year 5 = $138,446 x (1 + 0.05) / 0.09  

Sale price at the end of year 5 = $145,368.3 / 0.09

Sale price at the end of year 5 = $1,615,203.333

Therefore, the projected sale price of the property at the end of year 5 is $1,615,203.33